Rayovac 2011 Annual Report Download - page 26

cash flow from operations to payments on debt. In addition, the Senior Secured Facilities contain financial
covenants relating to maximum leverage and minimum interest coverage. Such covenants could limit the
flexibility of our restricted entities in planning for, or reacting to, changes in the industries in which they operate.
Our ability to comply with these covenants is subject to certain events outside of our control. If we are unable to
comply with these covenants, the lenders under our Senior Secured Facilities or 12% Notes could terminate their
commitments and the lenders under our Senior Secured Facilities or 12% Notes could accelerate repayment of
our outstanding borrowings and, in either case, we may be unable to obtain adequate refinancing of outstanding
borrowings on favorable terms. If we are unable to repay outstanding borrowings when due, the lenders under the
Senior Secured Facilities or 12% Notes will also have the right to proceed against the collateral granted to them
to secure the indebtedness owed to them. If our obligations under the Senior Secured Facilities and the 12%
Notes are accelerated, we cannot assure you that our assets would be sufficient to repay in full such indebtedness.
The sale or other disposition by Harbinger Group Inc., the holder of a majority of the outstanding shares of
our common stock, to non-affiliates of a sufficient amount of the common stock of SB Holdings would
constitute a change of control under the agreements governing Spectrum Brands’ debt.
Harbinger Group Inc. (“HRG”) owns a majority of the outstanding shares of the common stock of SB
Holdings. The sale or other disposition by HRG to non-affiliates of a sufficient amount of the common stock of
SB Holdings could constitute a change of control under the agreements governing Spectrum Brands’ debt,
including any foreclosure on or sale of SB Holdings’ common stock pledged as collateral by HRG pursuant to
the indenture governing HRG’s 10.625% Senior Secured Notes due 2015. Under the Term Loan and the ABL
Revolving Credit Facility, a change of control is an event of default and, if a change of control were to occur,
Spectrum Brands would be required to get an amendment to these agreements to avoid a default. If Spectrum
Brands was unable to get such an amendment, the lenders could accelerate the maturity of each of the Spectrum
Brands Term Loan and the ABL Revolving Credit Facility. In addition, under the indentures governing the 9.5%
Notes and the 12% Notes, upon a change of control of SB Holdings, Spectrum Brands is required to offer to
repurchase such notes from the holders at a price equal to 101% of principal amount of the notes plus accrued
interest or obtain a waiver of default from the holders of such notes. If Spectrum Brands was unable to make the
change of control offer, or to obtain a waiver of default, it would be an event of default under the indentures that
could allow holders of such notes to accelerate the maturity of the notes. See “Risks Related to SB Holdings’
Common Stock—The Harbinger Parties and HRG will exercise significant influence over us and their interests
in our business may be different from the interests of our stockholders.”
We face risks related to the current economic environment.
The current economic environment and related turmoil in the global financial system has had and may
continue to have an impact on our business and financial condition. Global economic conditions have
significantly impacted economic markets within certain sectors, with financial services and retail businesses
being particularly impacted. Our ability to generate revenue depends significantly on discretionary consumer
spending. It is difficult to predict new general economic conditions that could impact consumer and customer
demand for our products or our ability to manage normal commercial relationships with our customers, suppliers
and creditors. The recent continuation of a number of negative economic factors, including constraints on the
supply of credit to households, uncertainty and weakness in the labor market and general consumer fears of a
continuing economic downturn could have a negative impact on discretionary consumer spending. If the
economy continues to deteriorate or fails to improve, our business could be negatively impacted, including as a
result of reduced demand for our products or supplier or customer disruptions. Any weakness in discretionary
consumer spending could have a material adverse effect on our revenues, results of operations and financial
condition. In addition, our ability to access the capital markets may be restricted at a time when it could be
necessary or beneficial to do so, which could have an impact on our flexibility to react to changing economic and
business conditions.
In 2011, concern over sovereign debt in Greece, Ireland and certain other European Union countries caused
significant fluctuations of the Euro relative to other currencies, such as the U.S. Dollar. Destabilization of the
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